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Where we share our weekly news debriefs and discussions with industry experts. These are lo-fi recordings aimed at giving our readers more opportunities to engage with our analysis and a view into some of the conversations that shape it.
Martin: Happy Monday, Kevin.
How are you today?
Kevin: Good.
I missed you last week.
Martin: Yeah.
It wasâ¦
It felt like an interminably long
week not rounding, rounding up
the news of the week on a Monday.
There
Kevin: is too much healthcare news
to skip a week for a holiday, Martin.
Martin: It reallyâ¦
Memorial Day really it,
it, if, if we feel behind.
Yes.
Um, how was your weekend?
It was good.
Full of kids' dance recitals,
which was a fun life experience.
On Friday night, did you hear a
audible sigh of relief from the general
direction of Elevance's Indianapolis HQ?
Kevin: I thought I caught
wind of something, but tell
me about what went on Friday.
Martin: Well, I, I think you'd
have to call it thumb drive gate.
We talked about this a few
weeks back, months back.
But Elevance had been sending their
risk adjustment scores via thumb drive.
And-
Kevin: According to CMS,
Martin: right?
Accordingâ¦
Allegedly.
Allegedly.
Uh, s- in their most recent earnings call,
Elevance recorded a $935 million accrual
saying, "We think we might have toâ¦
We might owe CMS some money," and then on
Friday night, CMS published this letter
saying, "Elevance, we're not pausing
or, or not allowing future enrollment.
Um, we're not not allowing future
enrollment for, for Elevance," but
they still have some more stuff to do.
Kevin: Yeah.
But it was an intermediate step, right?
It's not like Elevance is fully in the
clear, 'cause as I read it, there'sâ¦
You can kinda see it in this DMS Daily
on May 28th, as required in step two,
there's four steps to this process
that they have to clear by the end
of, by the end of the month, right?
For them to, to make it through the steps.
This was just, like, you made it
through step two, so we're not going
to, um, uh, stop enrollments yet.
Yes.
But Elevance nonetheless, like, I,
I, if, if I recall, I don't know if
it was their last earnings call or
investor call, what have you, but,
um, they don't seem too worried that
there's going to be any material issue.
Martin: Yeah.
I, I will point out that in the letter,
CMS is like, "Thanks for the, the wire
transfer," and I'm very curious to see
how much of that $935 million accrual
ended up being transferred to CMS.
Yes.
Kevin: Are we pronouncing Elevance wrong?
Elevance?
Martin: Elevance.
Kevin: Elevance.
Yeah, that's what I thought.
Elevance.
Martin: Man, now I'm, I'm
gonna be in my head about this.
You know how FBI agents have those
cool windbreakers that you see-
Yeah ⦠on, when they're doing raids?
Kevin: Yeah, when I see, when I seeâ¦
Yeah.
Martin: I mean, I don't think
that you've seen them probably
personally, but just, like, on TV.
I've seen them on
Kevin: TV.
Yes.
Martin: Yeah.
Uh, I wonder if Medicare Part C
and D oversight and enforcement
group has windbreakers.
Kevin: I don't know.
Martin: Perhaps we should look at Dr.
Oz's videos on, on Twitter these
days for, for some insight into that.
Because I think they have a lot more
enforcement videos going on these
days I think it'd be good for, for
morale if they got a cool windbreaker.
Um, I feel like CMS enforcement
probably doesn't, doesn't getâ¦
There's no action shows of, like,
Law & Order: CMS OIG Division.
Kevin: I'm, I'm telling you,
man, at the rate we're going,
there, there very well might be.
There are.
What was the health system that
started the content studio?
Was it Northwell in New York?
Martin: Yeah.
Kevin: Remember that
news a couple years back?
They were starting a content studio for,
uh, TV shows like The Pit and stuff.
You never know.
Martin: Yeah.
Well, as you alluded to earlier,
we got lots to get through today.
Lots to round up on the Grand Roundup.
We're gonna talk about how many
hundred billion dollar health AI admin
companies can the market support.
I think it's probably less than you think.
Um, and then over in health law,
Kevin, what are we talking about today?
Kevin: Uh, Clover's Star case,
uh, provides some, um, big updates
potentially for future Stars program,
Medicare Advantage more broadly.
Lots of other legal updates as well.
Uh, No Surprises Act saw a provider
group in Texas suing Blue Cross of Texas
in an interesting legal case there.
CVS has a case going on in Tennessee
over PBM legislation there.
UnitedHealth Group is being sued by
the Massachusetts Attorney General.
Lots of legal cases to,
to unpack this week.
Martin: Well, I'm glad one of
us attended some law school.
Umâ¦
Kevin: On- on behalf
of law school, Martin.
Martin: Yeah, it's, it's
about half more than I did.
Uh, it's still very hard to
be a regional health plan.
So Providence is, uh, Providence Health
Plan, PHP, is shuttering it completely.
PacificSource is exiting the ACA
and the entire state of Montana.
And then later on, we're welcoming
Amit Shah, president of Virta Health,
to talk about what it was like to be
focused on metabolic disorders before
they were cool in the GLP-1 era, and
Michelle Turner, uh, who runs a company
called Here Now Health, and is focused
on a little-known aspect of, uh, state
Medicaid agencies which provide, uh,
Medicaid to foster youth and young adults
who've aged out of the foster system.
But first, a word from our sponsor.
Over to you, Kevin.
Kevin: Martin, today's show is brought
to you by our sponsor, Ursa Health.
Uh, if you're exploring or operating
in specialty value-based care,
Health Tech Nerds is sponsored, or
hosting a sponsored learning event on
Wednesday, June 24th, 12:00 PM Eastern.
We think you should join.
We're bringing together Atlas Oncology
Partners and Ursa to go deep on
developing, negotiating, and managing
multi-state, multi-payer contracts.
If you're in the value-based care space,
I can't think of a more relevant topic.
Learn more and register at
Luma, L-U-M-A, .com/htn-ursa,
U-R-S-A, dash atlas, A-T-L-A-S.
Martin: Really looking forward to this.
I feel like the cancer value-based care,
oncology value-based care contracts
have to be some of the most fascinating
value-based care contracts to negotiate.
Kevin: For sure.
I mean, we hear about it all
the time with Evolent on their
public earnings calls and others.
I- there's so much variability in the
oncology space, and with the cost of drugs
and the outcomes associated with them,
s- I, it's, it's an interesting market.
Amit: Excited to learn
Kevin: more.
Martin: So let's do some
level setting, Kevin.
How many $100 billion healthcare
companies are there before we talk
specifically about AI companies?
Kevin: In the healthcare services area?
Martin: Well, yeah.
So let's- Should we, should we
go down like- ⦠let's say X
pharma and X, uh, medical device.
Kevin: United,
CVS
HCA is, is flirting with
it, but not quite there
And that's it.
That's it.
I, the Acquired guys in their
podcast speculated that Epic could
potentially be valued at 100 billion,
like, as they were going through the
scarcity of that asset and, like, if
a big tech company could acquire it.
Personally, I think that's, like, a, it's
I, I, I don't think it's that high.
You, you think about Epic's revenue
at the size it is, I think Epic, I was
looking at this over the weekend, I
think Epic, per Forbes data in 2024, was
bringing in, like, 5 billion of revenue.
Which- That'd be a pretty
Martin: sporty multiple.
Kevin: Um A 20, a 20x revenue multiple
for a company that mature, yeah, seems
pretty sporty, uh, to steal Molina's, uh,
favorite phrase on v- company valuations.
Uh, so th- there's not many of them.
Now, medical devices, pharma,
that's an entirely different case.
As we were discussing this morning,
you have companies like Intuitive
Surgical, which is one of the most
fascinating entrepreneurial case
studies in healthcare that n- nobody
has spent enough time on, um, outside
of, like, the medical device investment
bankers who follow them and whatnot.
Um, Intuitive Surgical is worth
$150 billion right now for
its surgical robot platform.
I, I mean, it's, it's wild to
think about the disconnect in,
in valuations in that market.
Eli Lilly's gotta be pushing a
trillion at this point, right?
So, different worlds
Martin: Whole different world.
I mean, there was theâ¦
When Novo introduced their GLP-1, it,
like, increased the GDP of Denmark
so significantly that they had to
start reporting at ex, ex Novo.
Kevin: Yeah.
Martin: I, it is, it is $100
billion valuation's pretty high.
When I was, when I was thinking
through this, I think you could
also make an argument similar to
Epic for Kaiser, uh, that maybe
Kaiser's in the neighborhood, though-
Kevin: Hmm
⦠Martin: not public.
Um, or even for-profit.
Kevin: I would have guessed that
Kaiser would've been closer to, like,
a Humana, like in the 30, 30, 40 range.
But I, I- Yeah ⦠it
got me curious how big.
We should, we should do the math on
how big Kaiser is and, and try to- Yeah
⦠guess at what a valuation would be.
It's an interesting question to me.
I, and I, I wouldn't think it's there.
Nonetheless, I was musing on this question
in the Sunday newsletter um, after Chemir
announced their recent funding round.
They, I think it was before Memorial
Day, I lose track of the weeks given
everything going on, they announced a $70
million round at a $7 billion valuation.
And what, what caught my eye about
that was Hamant Taneja, a General
Catalyst, uh, investor who's been very
involved with Chemir, went on LinkedIn
to talk about how if Chemir is gonna
be successful, um, it needs to, uhâ¦
Should we pull up the LinkedIn point?
Martin: Oh, yeah.
Kevin: Um, if it's going to make real
strides for f- future of health insurance,
it needs to become $100 billion company,
which is a f- fascinating concept given
what we just talked about here, right?
Like, it is not straightforward to,
um, to think about how a company like
this becomes $100 billion business.
It was also interesting in the context of
that question to me to hear Chemir's CEO
go on the Sorcery podcast to talk about
the round, and his narrative in large part
was this kind of Rockefeller-esque, "We're
gonna build Standard Oil, we're gonna
acquire the industry to build a dominant
platform via M&A and acquisition," which
is, is a reasonable theory of the case.
Clearly it's, it's worked for titans of
industry in this country historically.
I think it's also a curious case to
unpack here in the healthcare industry.
The CEO himself, as he was noting on the,
on the podcast, at one point he talked
about how he, he wants to eviscerate
point solutions and he'll do so with
glee, and that is what Chemure is,
is, is attempting to do in the space.
Point solutions are gonna fall to the
wayside as these platforms come in,
take over relationships with clients,
and, um, we're gonna see, uh, a lot
of point solutions go under, um, or
become part of these broader platforms.
And Chemure is going to become this
platform from their point of view.
It was also interesting to note that
Chemure itself wins a lot of health
system relationships by starting as a
point solution and doing the classic land
and expand play of you go in as point
solution, you slowly take over contracts.
Which invites the question of,
like, how do you know who's
gonna win in this environment?
If everybody starts off as a point
solution and everybody has the
same thought of we're gonna take
over the relationship and win as
the platform, what ends up winning
in that environment, you know?
Martin: Two bits of sort of
business school trivia for you.
One is that Standard Oil, when it
got broken up, was actually worth
more to the Rockefeller, uh, the,
the Rockefeller shareholders after
it got broken up because it wasâ¦
There was a significant discount,
um, at them all being one company.
And so the, the value to shareholders,
um, I think that probably that
feels a little bit different if
you're a venture capital investor.
But I, uh, like the, the GC
folks, like they are hoping
to capture all of that value.
But, um, in general, there are
sort of diseconomies of scale.
Mm-hmm.
The other one is, uh, I, I can't remember
who, which CEO it was, but he said,
basically, there are only two moves
in business: bundling and unbundling.
And we are clearly in a bundling era when
it comes to healthcare AI solutions, or at
least that's the, the theory of the case.
We hear it from K Health-
Kevin: Mm-hmm
⦠Martin: in, you know, their, their
announcement, uh, with Penn Med basically
saying, "This isn't a point solution play.
We are the front door.
We are the multi-vendor AI offering
for these academic health centers."
And yeah, it, it's a good move to
make, uh, if you time it right.
But eventually everyone starts
saying, "Okay, am I getting
overcharged by my one big vendor?"
And then they start kicking
the tires on point solutions.
And so to me, the question of
whether Kamiya is going to ever
hit this $100 billion valuation
is, are they timing it right?
Is this the moment where, um, we are going
to see a acceleration in people dropping
point solutions and going afterâ¦
And I think, you know, there's,
there's kind of evidence thatâ¦
And then the second question being is,
you know, is Kamiya the winner in that?
Mm-hmm.
Uh, but it really requiresâ¦
It's like a dependent
on the first question.
We're seeing evidence kind of go
both ways, and I'm, I'm curious
to hear your view on this because
we saw Conifer Health, um, get
tucked back into UHS- Mm-hmm
basically on the opposite theory
that, uh, AI was going to help,
um, the partner in that joint
venture, the, the big health system-
CommonSpirit do web cycle on their own.
Like bring it in-house.
Kevin: Yeah.
Martin: They did, they did- they, they
were, they were gonna go out and buy point
solutions for where they needed that.
And so, I don't know,
what do you make of that?
Kevin: Yeah.
I, I was actually pulling up the
CommonSpirit-Conifer-Tenet, uh,
transaction as an example of this, 'cause
I, I think it's a good case study of
the failure mode here as, as we start
to go through this bundling cycle, which
to your point, I think is very much
happening and we're seeing it withâ¦
We see it with Chemir, we saw it with
Innovaccer acquiring, um, the RCM
startup it acquired, uh, the other day.
We're seeing this play out where
you're rolling up point solutions
in the platforms, and the natural
next step is then, to your
point, the unbundling of that.
The CommonSpirit-Tenet deal seems
like a good example of CommonSpirit
had Conifer in as its end-to-end
administration platform, and it seems
like if you're CommonSpirit, you're
looking at all of the opportunity in AI.
You've had this partner, it's not actually
materializing in the way that you,
you, you think in, in theory it might.
And so the natural solution is
saying, "Hey, let's insource this.
Let's have a, a constellation of
vendors each doing specific things,
and then our team manages that so
we are using it best internally."
And to me, that's kind of the
natural evolution of the life cycle
that, that we'll see over time.
And it'sâ¦
It all comes back to the question of,
of what actually works here, you know?
Like, it's, it's hard to tell at
from the outside what's going on
inside these organizations, what
change is actually happening.
I-Iâ¦
Chemir is the best example of a company
where people across the industry
will send us messages being like, "I
don't know what Chemir actually does.
I can't tell."
And as an outsider, I, I, I
struggled telling that too, right?
I thought it was interesting to hear
their CEO on, on Sorcery talk about
their relationship with Summa Health,
which is that health system in Ohio
that, that General Catalyst now owns.
And the way he described it was
essentially saying, "We're using
it as a proving ground to prove
out that we can help save a failing
system via implementing solutions
like Chemir, AI, et cetera."
And the, the way in which he described
what's going on at Summa is essentially
a whole bunch of forward deployed
engineers on the ground in the health
system trying to save, save the health
system, trying to identify opportunities
for better margin efficiency, to
implement those, to make it work better.
And-
It's an entirely logical play
in my mind to, to try to run.
It's also the same playâ¦
Like, I worked in a health system.
Uh, any health system person will tell
you they, there have been teams of
consultants who have come through these
systems before to identify efficiency
opportunities with mixed success, right?
We just saw a paper looking at the
impact of consultants over time
on health system margins, and it
found, I think zero impact, right?
So, uh, it, it highlights the struggle.
You can also see the, the
opportunity with an AI to rethink
that, potentially do it better.
I wrote in the newsletter, like, if I'm
thinking about the bull case, bear case on
these things, the bull case is essentially
a Palantir for healthcare-like model.
You, you take consultants, you turn
them into more software-focused,
forward deployed engineers, and you
go transform these organizations.
And you do it in a way that they
couldn't do it from the inside.
You actually do generate
margin improvements, and
that leads to more success.
Now, in healthcare, Health Catalyst
I actually think is, like, a really
good counterpoint to that, right?
'Cause Health Catalyst is sitting
out there on the public markets
at $100 million market cap right
now, which wasn't that dissimilar.
Like, the health system I worked for,
Martin, we sold our data analytics
t- like, the data analytics team was
outsourced to Health Catalyst, a big
public transaction right around when
they were going public originally,
on that general theory, right?
Like, Health Catalyst can do data
analytics better for a system to
improve margins, to improve efficiency
They're sitting at $100
million, not $100 billion.
Martin: Yeah.
I, I think you have, you know, the
Palantir comp is, like, I thinkâ¦
I'm looking at it right now, 382.97
billion.
So yeah- Mm-hmm ⦠you would
much rather be compared to
Palantir than Health Catalyst.
Yeah.
But I'm not sureâ¦
Yeah, I'm not, I'm not sure I can
point to what the, the difference
in the, the narrative is besides
sentiment, uh, on those two.
And you've made this point a couple
times, but if there is going to be a
Palantir of healthcare, why not Health
Catalyst, which has the relationships,
the engineers in the big health systems
and, and in those markets today?
Kevin: Yeah.
It, uh, I, I mean, the, the only
answer to that question that makes,
that makes sense to me is, um, it
being a statement about management
and investors and their thoughts on
management's ability to execute on
that, that transition moving forward.
Like, the, to me, that's the
only logical explanation there.
Because to your point, you've got
the contracts and relationships.
You should be able to help your customers
navigate this changing environment
via those relationships, right?
Which I actually think is a, a big
opportunity for Health Catalyst if
they can, if they can figure that out.
So it'll be interesting to watch.
I-
If I'm thinking about the
original question here of how many
billion-dollar AI healthcare admin
platforms were there, will there be?
I don't know that I think it's aâ¦
If I step back, I could certainly see,
going back to the beginning of the
conversation, the companies today that
are around $100 billion, United, CVS,
HCA is, is not quite there, but close.
I could see a scenario 20 years
from now, 10 years from now, where
you and I are talking and there's a
new $100 billion services business
that started taking off in this era.
Similar to United started really
taking off to become the company
it is today in late 2000s, right?
I think if I break down what it
takes to become that $100 billion
company, to your point, I don't
think you are just a services
provider to HCA as your main client.
Like, the idea that, that Qmure or any
company is gonna be larger than, than
HCA, I just, I, I don't fully buy.
But what I could see is, like,
go back to the, um, Sorcery
podcast and this Rockefeller-esque
ambition of rolling up a market.
If Sama does work and they figure out
that they can improve margins at a
system, I don't know what's stopping
them from taking that playbook to other
systems across the country and expanding
what they think of their business
as to become a more efficient way of
running healthcare in this country.
And that's where all of a sudden it's
like, uh, I don't think it's very likely,
I, I, I, I would not be betting on this
happening, but I can at least tell myself
a narrative like, okay, if they can
figure out how to run a health system
with 5% better margins, 10% better margins
through the use of AI, and they are
deploying it in these systems by buying
them via Qmure or whatever entity it is,
that Taneja is a big enough thinker that
he could try to go roll up the space.
Again, likelihood low.
But to me, that is like, if I'm trying
to articulate the bull case of how, uh,
Taneja gets there and we get this $100
billion company that's moving towards this
health assurance future he's talking about
It is through that kind of scale, right?
Martin: Yeah, I think there's a lot
of health systems who could use a 5 to
10% bump in operating profitability.
And so if that is the case, like, that
is a, a sort of pretty obvious buy.
Uh, you take and roll up a bunch
of struggling health systems.
Could you do the same thing with,
like, regional health plans?
That's another thing
we've, we've talked about.
Kevin: Martin, maybe you even launch
provider-sponsored health plans that
actually work because you have AI that
can understand where, how sick people
are, and you can proactively intervene
earlier because you own the doctors.
But then you're a vertically
integrated entity that is being
broken up by, by DC at the moment.
Yes.
So I, I, I don't know.
Martin: It seems tough.
Well, I think it's time for
us to move on to health law.
Ooh.
I wanna start with Clover.
So Clover s- stock jumped 16%
on Thursday after a judge tossed
several star metrics and asked CMS to
recalculate some other star metrics.
I spent a little time in
Claude on Thursday morning
trying to figure out- This is
Kevin: dangerous
⦠Martin: yes, it's very dangerous.
No, but just trying to get, like,
basically a rough cut of, like-
Yeah ⦠who is, who is the, who are
the other health plans that plausibly,
um, plausibly could benefit here?
And Clover, based on my sort of quick
read, was the one that was closest.
Like, right on the bubble, basically.
Where if you toss these star metrics,
if you have CMS recalculate these
other star metrics, they could go up
from three and a half to four stars.
That would be worth, like, 120 million to
them, which would be really meaningful.
CMS is appealing, so I think it's
a big TBD on whether that will be,
you know, you, you can count that
as 120 million in Clover's accounts.
Mm-hmm.
But I thought that Andrew Schwab on
LinkedIn had an interesting point, and
you talked about this a little bit in the
newsletter, on, you know, between this
and Chevron, is this the, you know, sort
of are we entering a new era of stars?
Can you walk us through what the
Chevron, what Chevron is a little bit?
Kevin: It'sâ¦
Yes.
So I, the, the idea is that the,
the Supreme Court overturned, um,
uh, uh, one of the key doctrines,
um, uh, that argues thatâ¦
It changes the way we look at
the history of how, um, federal
agencies interpret statutes.
And so it calls into question a
whole bunch of interpretations
of various statutes.
And so Andrew's point on LinkedIn, which
I thought was a good one, is that when you
take a ruling like this, which is, like,
in the minutia of what stars measures
are in or out and how do we evaluate
that- It, it calls into question the
entire program and what's ahead for it.
And to me, that's the
interesting point here.
There are a few other LinkedIn posts
that I saw too that, um It, it,
they, they raise the point that this
in, in- introduces a whole bunch of
uncertainty in the program, right?
You mentioned CMS is going toâ¦
Is appealing.
This isn't gonna be resolved any
time in the near future, I wouldn't
think, given how our legal system
tends to work and, um, how long it
takes to decide these sorts of things.
Uh, is it today that, that bids are due?
Martin: Yeah.
Kevin: For next year?
So, like, y- you could imagine the
amount of uncertainty when you, you
don't know how this is gonna play out.
You, you see Clover having this
result, which is a great result for
Clover, that has its stock price bump.
You can imagine the product teams are
having to go through essentially two
different scenarios of planning, of like
what if stars changes meaningfully as,
in the future as a result of this, versus
what if the federal government wins this
case and, um, this doesn't materialize.
But it's a lot more uncertainty for
the program, and you really gotta
know what you're doing and be placing
bets on what's gonna happen here
if you're filing product right now
in the future Medicare Advantage.
So it's, to me, it's this interestingâ¦
We've talked a lot o- over recent
months with the advance notice to final
notice and all of the changes about how
it's hard to operate in an uncertain
environment for these businesses,
and it, it, it's more of that, right?
So, uh, it'll be interesting
to see how it plays out.
Um, good for Clover for, for bringing
the case and, and winning it.
Um, clearly their stock benefited
from that, but it's gonna be
fascinating to watch, I think, ahead.
Martin: Yeah.
I, I think that the other piece of it,
right, so there's the bid strategy, but
then there's also just the, the day-to-day
blocking and, and tackling that you
need to do to, to get your star scores.
And if, you know, 10 measures are, are
getting thrown out and you've built
a team that's like, uh, you know,
focused on med adherence or whatever,
you have a med adherence, um, you
know, tiger team who's going after
those measures, they might need to be
focused on something else if those are
not- Sure ⦠the measures that, uhâ¦
And so it, it is a, you know, it,
it touches bid strategy, but it
also touches just, like, day-to-day
operational blocking and tackling.
And so pretty major, something to watch.
Um- Yeah
⦠Kevin: yeah.
And it's interesting to see
the list of plans on this too.
Like, if you're devoted and you're
sitting at three and a half stars, and
the implication of this change is that you
could get to four stars, I'm sure that's
a meaningful adjustment for them too.
We don't know as much of their financial
situation 'cause they're not public,
but, um, man, I, this is, it's gonna be
fascinating to watch how this plays out.
Martin: It sure is.
Um, over in the Bay State, Massachusetts
The Massachusetts Attorney General
filed a lawsuit against UnitedHealthcare
alleging over 100 million in D-SNP
upcoding over a 11-year period.
Don't have much to say on the
merits of the case, but the lawsuit
is a interesting read into the
complexity of the duals market.
You flagged this chart.
I am interested in the duals
market for a lot of reasons.
You know, it's like a, a sort of state
federal Medicare, Medicaid combined
program, and this is Massachusetts
saying, "Hey, we think that we, we paid
too much for, for some of these plans,"
because, um, you know, uh, we're alleging
that UnitedHealthcare was, you know, s-
saying they were sicker than they were.
I willâ¦
I, I, I think that as the, the
market is generally pretty bullish
on dual and SNP plans at the moment.
Mm-hmm.
And it is interesting to see that
bullishness also sort of start to, um,
trickle into some regulatory pushback on
a much tighter timeline than we have seen
in, you know, it's like the run-up to the,
the sort of Medicare Advantage gold rush.
Like, that was many years where, where
the market was really excited about
it, and then finally regulators got
interested, and clearly regulators have,
have, uh, learned their lesson and areâ¦
See where the puck is going, and
they're, they're starting to, to
kick the tires on these things.
Kevin: Yep.
Iâ¦
I- if you wanna understand D-SNP plans
and how complicated it is to operate
these things, I think it's well worth
going through this legal filing to, to
get into the, th- the little details of,
you know, it's laid out on this chart.
You've got level one,
level two, level three.
You've got nurses going out,
um, to do assessments of people.
It, it, it's, it's a complicated program
to execute in, and if you're looking at
going to work for a company in the space,
investing in companies in the space,
I think it's worth thinking through,
um, the complexity of it and the, the
political, the legal dynamics around
all of that in today's environment.
It's gonna be interesting
to keep an eye on.
Martin: No Surprises
Act still in the news.
Um, so a couple of things going on here.
Do you wanna start by talking about
what the heck is going on in Texas?
Kevin: So I, I, I don't know how Blue
Cross of Texas seems to be taking
the brunt of so much of this, but
they, there were two press releases
from different provider groups in
Texas in the past couple weeks.
One, Radiology Associates of North Texas,
which- They, it seems like they did an
internal analysis of No Surprises Act
IDR, the independent dispute resolution
process results, and they basically
said Blue Cross Blue Shield of Texas is
not paying out claims as they should.
They are upset because technically, right,
you go through this IDR process, it'sâ¦
Is binding arbitration
the right phrase for it?
Uh, at the end of the arbitration,
regardless of whether or not
you agree with the result, the,
like, legally you have to pay.
And their point is Blue Cross
Blue Shield of Texas has only
paid 2% of the awarded balances.
This radiology group has incurred more
than $51 million alone in administrative
waste as part of this program.
Neither of those data points
seem particularly good.
I can imagine the reason why Blue Cross
Blue Shield of Texas is only paying 2%
relates to the other press release that
came out, which was from Halo MD, which
is the kind of most well-known, I'll call
it actor, in the No Surprises Act process.
It has done very well as, um,
the, the model has come up.
There have been a number of
articles written about the
model, the founders, et cetera.
Uh, but Halo MD issued a press
release, um, after they won a legal
case against Blue Cross Blue Shield
of Texas, uh, as a federal court
judge dismissed the case on the whole.
If you are interested in this topic,
I would highly recommend looking at
these legal documents, going back to the
initial complaint from Blue Cross Blue
Shield of Texas, because the complaint
is essentially about how Halo MD is, is
abusing the process, driving a whole bunch
of claims through it and increasing costs.
The reason why Halo MD wins the case
has nothing to do with that argument.
It has everything to do with this is
the law, Blue Cross Blue Shield of
Texas needs to abide by the law, and
you need to pay out these claims.
So I imagine what Blue Cross Blue
Shield of Texas is doing is, uh,
they're, they're withholding payment
until these legal cases are resolved
because they are saying all of these
claims going through the program
shouldn't be going through the program.
The providers are saying, "Yes, they
should pay us for them," and the
providers are winning that case.
And I wouldâ¦
Like, given the couple cases we've seen
in this market, I think the providers
are gonna keep winning that case, and
it, um, regardless of what we think of
the overall impact of the No Surprises
Act, good or bad, it's one of these
examples of it's now the rule of the
land, and we've gotta follow it, right?
And so it's interesting to see and
think about how it might change
going forward as a result of that.
Did you look at the, the
modifications coming out of DC
last week on No Surprises Act?
Any take on-
Martin: Yeah ⦠what was
Kevin: coming out of that?
Martin: So the IDR operations rule
was proposed like four years ago
under the Biden administration.
Mm-hmm.
And they just kinda never
got around to finalizing it.
So they finally finalized the rule.
And we had Loren Adler from
Brookings on last week.
He kinda gave us a preview and said like,
"Look, this isn't gonna solve any of
the problems that people complain about.
It's an operations rule.
It's technical in nature.
It is not that interesting."
And he was correct.
It is a it's a technical rule.
Uh, I- my take on the, the IDR rule
after looking through it was It is
streamlining the process, and what
happens if you make the current process
more efficient is probably on the
margin we're gonna get more No Surprise
Act claims, and, you know, prices are
probably going to continue to go up.
We didn't solve the problem.
The, uh, CMS can't solve the problem.
This is something that
Congress needs to do.
And so, uh, making the system more
efficient is, is nice and well and
good, but it is now a more efficient
system of taking premium dollars and
turning them into large, some might
say above-market payments to- Mm-hmm
Halo MD.
And that's great for Halo MD and, and
their docs, and their shareholders,
and bad if you have insurance.
Um, but that's the law.
I don't know.
You're, you'reâ¦
If you're BCBS Texas, like, you are
free to avail yourself of the legal
system and to lobby Congress and, and
do those things, but you gotta pay.
Kevin: Yeah.
I, Iâ¦
To me, uh, if I'm advising Blue Cross
Blue Shield of Texas, I- it seems like
the wrong strategy to not pay docs
for the outcomes, regardless of what
you think of them, because, to your
point, it is the law, and you should
know that it is political ammo, at the
very least, for providers to issue the
press releases that they are, to then
go to DC and make the case of, "Hey,
insurers aren't, aren't playing fair."
And w- when you've got a data point
out there publicly, like Blue Cross
Blue Shield of Texas only paying
2% of what they're supposed to,
that's a, like, that's a tough data
point to have out there if you're
the, if you're the payer community.
I am, I am fascinated to see
how this conversation evolves.
To your point, Iâ¦
It seems like it's not gonna go anywhere.
We've now created a cottage
industry around this process.
As we discussed, often profit pools
do not tend to shrink willingly.
They tend to go up over time.
Um, and I would, I would guess
that's what's gonna happen here.
We're gonna see a bigger and bigger
industry around this concept.
But, like, going back to kind of first
principle, like, when this legislation was
created, it was all about how do we reduce
surprise bills for the consumer, right?
That was essentially what
the process was around.
And to me, it'sâ¦
I, I don't think we would have
much disagreement in this country
that surprise bills are a bad thing
and we should do away with them.
To me, it is a really good example,
though, this legislation, of the
unintended consequences of you try
to solve that problem by getting in
the middle of what is fundamentally
a fight between payers and providers
over how they contract with each
other and what the underlying rate is,
and- You don't solve that fight, you
just create a new forum to have it.
And it's not surprising that, like,
both parties continue having that
fight within that forum, right?
And you don't actually
change the underlying issue.
And so, yes, we don't have surprise
medical bills anymore, that's a good
thing, but also we have higher premiums
in states presumably because now
insurance are paying those higher bills.
And it all comes back to what problem
are we trying to solve here, and for who.
Martin: Yeah.
Kevin: You know?
Martin: I've said before, and I will
continue to make the case, that I think
the No Surprises Act is, is a, uhâ¦
Like, I think we should call a success
a success, in that it is good that
people can't get balance billed anymore
because payers and provider groups
can't come to an agreement on, you
know, an anest- anesthesiology rate.
And to solve that problem, you
need to make someone unhappy.
You either need to pay the
anesthesiologist more than the
payers wanna pay them, or you
need to pay the anesthesiologist
less than they wanna be paid.
And one of the things that's interesting
now, if you think about the n- dynamics
of the negotiation, is payers are probably
more interested in coming back to the
negotiating table and offering a, uh-
more fair and maybe even a little
bit painful to them price for
anesthesiology or ER docs or w-
whatever, whatever, uh, is getting,
you know, getting these claims.
But if you're Halo MD, why
would you say yes to that?
Like, you have the payers over a barrel
at the moment, and so the time to
strike a good deal was a while ago.
And now i- i- if you're a provider
group and the No Surprises Act is, is
working for you, like, w- what's the
incentive for you to come to the table?
Even if the payers are like, "Yeah,
this is, this is painful, and, you
know, the regulators are gonna start
getting interested in our solvency if
we have to pay out all of these things."
Kevin: Mm-hmm.
Yeah.
Martin: So CVS is suing Tennessee,
and that's the last bit, um,
from the Health Law Corner.
Basically, Tennessee became the
second state in the United States
to pass a law saying that PBMs and
pharmacies have to be separate.
They can't be one- Arkansas
Kevin: was the first
⦠Martin: Arkansas was the first, and
there's lawsuits ongoing in Arkansas,
um, on, on, on, on that law as well.
It is one of those things where
if you just describe to someone,
should the insurance company
also be able to own a pharmacy?
You're kinda like, "Ugh, I don't know.
That seems a little conflicted."
And the law forces divestiture.
So basically CVS Caremark would
have to divest all of its, uh,
pharmacies and specialty pharmacies.
For CVS, that's a big deal 'cause
CVS is, you know, uh, a largeâ¦
one of the largest PBMs and also one
of the largest, the only large publicly
traded, uh, uh, retail pharmacy.
So this is a big case for them, and I
think a bit of a headache, especially
if other states pick up the torch from
Tennessee and start going after this.
Kevin: Mm-hmm.
One of the things I was curious
about in reading about this case over
the weekend was, like, why is it-
Why is it just CVS seemingly suing,
given CVS is one of three big PBMs?
Um, a- as I understand it, CVS is the
only one that operates both the PBM
and the pharmacy business in Tennessee.
So it sounds like this isâ¦
This legislation is, like, specifically
going after CVS in the state of Tennessee,
which I can, I can see, see why they
wouldn't take too kindly to that change.
Martin: Yeah.
In Arkansas, I believe it is Cigna
and ex, uh, uh, Express Scripts, um,
who is leading the lawsuit there.
But you have to imagine all of the
PBMs, I forget what the name of
their- Mm-hmm ⦠the catchy name
of their trade association is.
They're all like, "Yeah, we, we gotta stop
this 'cause this is our, both our business
model today, but also what we've kinda
premised a lot of our future growth on is
this specialty pharmacy PBM integration,
and we can't do that if it is illegal."
Kevin: Yep.
I was reading the, the Tennessee
Lookout had some good local coverage
of this, and it, it, it highlights
how complicated all of this is, right?
CVS has spent a bunch of money
trying to, um, uh, push against this
legislation, but also, uh, the trade
group in Tennessee, the Tennessee
Pharmacists Association, seems to
have strong political sway pushing for
independent pharmacies in the state.
Um, and so you can imagine all the local
political dynamics at play in a scenario
like this of you've got the independent
physicians, or pharmacists, excuse me,
who are in the state senate and whatnot.
And, um, it's a challenging
environment in that scenario.
Martin: Yeah.
The, the independent pharmacists are a
huge winner if all of this business, you
know, if, if, if, uh, Caremark has to
go and, and do deals with all of them.
Kevin: That's the whole
theory of the case, right?
Like, this is intended to support those
inindependent- independent pharmacies.
Which- Yeah ⦠um, on its face isn't-
⦠uh, you know, I, I can't push back on the
idea of supporting independent pharmacies.
Um, I don't know.
It's complicated.
Martin: Yeah.
It will be interesting to get a, a,
a sort of survey of people with, with
takes on this about whether prices
will increase, decrease, or remain
the same in Tennessee and Arkansas,
um, on a sort of pre and post basis.
For sure.
All right.
Excuse me.
So, um, very quickly, today's show
is also brought to you by Abridge.
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Always like hearing what Shiv
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for beyond the Ambient Scribe,
like what, what's going on here.
Kevin: For sure.
I listened to his podcast on 20VC.
Is that what it is?
20VC the other day, and he is one of
the most kind of mission vision aligned
founders in the space right now.
It'll be fun to hear what they,
um, what they have cooking.
Martin: Yeah.
So I wanna go back to a sort of
evergreen theme on this show,
which is that it is hard to be a
regional not-for-profit health plan.
I show this chart all of the time.
I think, you know, my friends
and loved ones are sick of, of
seeing it and hearing about it.
There was more news though this week, uh,
more sort of points of evidence for why
it's hard to be a regional non-for-profit.
What happened, Kevin?
Kevin: So we saw two more plans this time,
both plans in the Pacific Northwest, um,
announce plans to exit various markets.
Providence Health Plan, they'll be
shutting down all lines of businesses.
Well, they'll be shutting down its ACA
Medicaid employer businesses in 2027.
Sounds like they're stillâ¦
They, they think that they will have a
national carrier to take on the Medicare
Advantage business, so that willâ¦
Those members will transition over
to whomever the national carrier is.
Um, so technically they- they'll
just get transitioned over.
That, that line of business
won't be fully shut down.
Nonetheless, Providence is exiting
that line of business, um, after
some serious financial issues
over the past couple years.
They lost $100 million in 2025, um, which,
uh, is what ultimately drove the shutdown.
There was some interesting local, uh,
coverage of kind of the collapse of the
plan and how that changed over time.
If you, umâ¦
The Willamette Week is what the,
the local newspaper is called.
Anyways, it, it provides a really
interesting kind of journey through
Providence Health Plan from the era
pre-COVID into today, and highlighted,
um, how the plan has struggled
over the last couple years, right?
There's been leadership changes.
Leadership came in and was, according
to the article, perhaps more focused
on bringing in, you know, Silicon
Valley startups and partnering with
those, wasn't entirely focused on
core management of, of the plan.
Which again, also to an ongoing theme
of ours, a lot of the success of these
sorts of plans, it's just basic blocking
and tackling, and focusing on what you
need to do well, and then getting to
scale so you can, can do that well.
Um, it's unfortunate for Providence,
which I think they started in, like,
the l- the 1980s on this health plan,
and it goes to show how quicklyâ¦
I mean, when I saw this in Minneapolis
with some of the plan, um, changes here.
You, you have these longstanding
institutions in your local markets
that have been there for forever,
that have been doing really well,
and then in the last couple years to
the point of this chart, things have
started going sideways really fast.
And all of a sudden, if you're Providence,
your health plan's losses start putting
the overall entity at risk, and you've
gotta make some hard decisions, you know?
And so in this case, they
shut down the health plan.
Um, we also saw Pacific Source,
which is partly owned by a
health system, Legacy Health.
They're exiting the ACA market
entirely, and they're also exiting
their full business in Montana.
That affects 42,000 members across,
uh, the couple states that Pacific,
that Pacific Source operates in.
It's a tough market, Martin.
I, I don't know how else to say it.
Yep
Martin: It sure is.
I, so on the, the sort of vividly the
Providence CEO of the entire group, the h-
the health system and the, the plan- Yep
described it as an untenable situation,
and I thought that that was like a
sort of really vivid, vivid adjective.
It's interesting to think about what
this does to the market dynamics,
like the payer market dynamics.
So ACA, and this is just like
a sort of persistent story.
Everyone's exiting the ACA markets.
Cigna made the announcement earlier
this year, and it seems like with
the ACA, like they're justâ¦
We need more concentration to make this
potentially profitable for ACA plans.
And so one way that that happens
is, you know, a payer drops out,
and now there's fewer options, and
they can, they can charge more.
Medicaid, um, they didn't talk about
this explicitly, but you and I have,
have theorized that like the, the big
Medicaid plans h- have to be kicking the
tires on the Medicaid book of business.
Molina called this out at their
Investor Day and said, "Look, when,"
excuse me, "when a Medicaid plan
is going out of business, we can
acquire it for just basically the
cost of, of regulatory capital.
We just sort of move the account,
you know, move the, it into an
account in that state and, you know,
20% of revenue or whatever it is."
And I, I, I wouldn't be surprised
to see Centene or Molina, um, end up
with the, the old PHP Medicaid book.
And then employers, like
where does that land?
It lands at the, you
know, Elevance, Cigna, or
Kevin: United.
Yep.
It was interesting to see in that
Williamette week coverage of Providence,
I hadn't heard this story before, but
they called out a partnership that
Providence had with Collective Health.
Um- Calling it a disastrous launch
disrupting healthcare for thousands.
Um, the two companies insist
the situation have improved,
but numerous providers' patients
continue to report serious issues.
It's, it's an interesting kind of
blending of innovation world with these
plans and how you can imagine a, a plan
leader wanting to be forward-thinking
and innovative, particularly for the
employer market, is bringing in a, a
partner like Collective, um, to come try
to, uh, change the directory of the plan.
Um, it does not seem to have worked in
this situation, which again is just,
it's indicative of the challenge here.
I thought it was funny.
I was reading, um, on Jama's Twitter
feed, they had a new article posted
this morning, um, yesterday, yesterday
morning, about, about the growth
in, uh, provider-sponsored health
plans, um, uh, between 2018 and 2023.
Uh, noting that hospitals owning health
plans have gone up from 18% to 27% between
2018 and 2023, which you can almost
predict what the updated version of that
from 2023 to 2026 would be, which is we're
gonna see those start to, to go back down.
But it's, it was indicative, uh, I
mean, having worked in the health system
between 2018, 2020 period, there was
a lot of appetite and interest, uh,
in owning these plans, and the theory
of it makes total sense to me, Martin.
Like, I, I think that is why we keep
running at this concept as an industry
of, uh, if you own the provider who has
the trusted relationship with the patient,
and so much of the problem theoretically
in the industry is the friction points
between payers and providers, should
you not be able to solve that almost
entirely by just having the provider
own the plan in the local market?
The theory of that, it, it's,
it's really enticing, right?
The practice of it is hard from
an actuarial risk perspective
because at the end of the day, it's
tough being an insurance business.
Martin: Yeah.
I, I would love to talk to, you know,
even off the record one of theseâ¦
'Cause I, it seems to my intuition on
this, and I know that this is a little
bit naive, but it's like the biggest
expense, like a single line item
expense is your hospital for your plan.
Like, can you not figure out a way to, to
do a deal there so that you are getting
your medical expenses at your hospital?
And, and maybe it is like
it's hard to steer yourâ¦
But it, it, it, it, I find it baffling.
Um, yeah.
Kevin: Yeah, it is, it is hard to square,
but it clearly ha- uh, you know, this,
we've, we've seen multiple runs of this
idea of the provider-sponsored health
plans, some more successful than others.
We've talked about Clover
a little bit in this call.
Clover essentially started as a
provider-sponsored health plan in New
Jersey with the plans that it's, um,
or with the system that its, uh, um,
founding CEO was part owner of, right?
Like, that's where it got its start.
That's where it has its highest density.
And it seemingly is doing pretty
well in operating that plan, right?
Yeah.
Um, Bright more or less when it started
before it got over its skis in terms
of its ambitions, was pretty close to a
provider-sponsored plan as well, right?
In Colorado market where it
first launched with, is it
Centura that was there, Martin?
Martin: Yeah.
Kevin: Yeah.
Um- Uh, I mean, they just had closely
integrated partnership, HMO product
offering, acquired the membership
out of the, um, the failed co-op,
and had a really tightly knit, um,
offering in partnership with that plan.
The theory of it is, like, it's great.
I go back and I read that, uh, Bessemer
Bright initial investment thesis, and I'm
like, "Yeah, this is, this is awesome.
This is it."
Uh, Bessemer has now taken that
down subsequently, um, which is
indicative of how Bright played
out on the public markets, right?
Like, you, you, you get a
little over your skis in growth.
Which, by the way, is also an underlying
theme in so many of these failures
is in this 2018 to 2023 period where
growth seemed really enticing in
these plans, you got leadership that,
that tried to grow a little too fast,
and it put the entire plan at risk.
And it's kinda wild how, like, you've
got 40 years of operating results
that just go poof overnight because
of a couple years of bad calls from,
uh, a membership growth perspective.
Martin: You would also think that a
regional nonprofit would feel lessâ¦
They obviously have incentive to grow.
Mm-hmm.
And they also obviously benefit
from, from scale, but you think
that they would feel it a little
bit less than the venture-backed
and, and, and public companies.
But I, I agree.
I mean, I think if youâ¦
If this graph is any indication of,
like, what the rate of provider-sponsored
plans is going to be in 2026
and beyond, it's, uh, not great.
Kevin: Yep.
If Iâ¦
Last thought on this point from me.
If I'm Chris Klomp in CMS, and I am
thinking about how I want to encourage
more competition in markets, which they've
talked about for Medicare Advantage in
particular, provider-sponsored plans
seem like they have to be part of the
answer and, and helping them succeed.
It, it, it needs to be
part of the answer, right?
Because otherwise, you get what was
happening in Pacific, Providence
Health Plan, where it, um, uhâ¦
Yes, we can see your comments, um,
to the comments that are coming in.
Uh, you've got Providence Health Plan
that is only keeping its MA plan afloat
by partnering with the, um, the, the
national plan, and that's what they're
doing with that membership now, right?
So it, um- The only way I can see
facilitating a competitive market
is by figuring out how to have these
local more-- these more local plan
offerings succeed, which raises a
whole bunch of interesting questions
on going back to this concept of
leveling the playing field, how you
attempt to do that moving forward.
Because clearly it's not working
for these plans at the moment.
Maybe 2026 starts to change that.
Maybe the results we saw in Q1,
uh, persist and that's a, that's
a tailwind for these plans now.
Be worth keeping an eye on that.
Martin: Well, w- as we keep an eye
on it, I think it's time for us
to move on to a little ping pong
before we bring on our first guest.
And so let me, uh, do you wanna
kick us off with talking about Oura?
Kevin: Yes.
Oura confidentially filed S1, uh, will
be worth keeping an eye on, uh, as they
start going through the IPO process.
We, you know, it's first since we
saw Hinge, uh, Omada go through IPO
process, indicative of the momentum
the wellness market has at the moment.
I will be really curious to see
how closely their S1 resembles the
Fitbit S1 from a decade ago now.
Fitbit's S1 at the time, if you
go back and look at it, was, uh, I
mean, very much consumer-oriented
device, but future growth strategy
is in enterprise healthcare.
We're gonna start selling
to employers, uh, whatnot.
And, um, uh, that was their
strategy at the, at the time.
I imagine that Oura's S1 will similarly
have a, a heavy dose of healthcare
ambitions as it is, um, talking its
narrative for future growth and whatnot.
And I think they're-- they just
announced a new product feature
update, which I, which I think
is indicative of that, right?
So they added in health features, um,
in this new ring they launched this
past week, blood pressure monitoring,
nighttime breathing, GLP-1 tracking suite
around for folks who are taking GLP-1s.
And most interestingly to me was they
launched a partnership with Council Health
to integrate its virtual AI-driven care
delivery model into the Oura experience I
am fascinated to watch how that rolls out
over time, and if Oura is, you know, on
the public markets giving updates on the
business, hopefully they give us updates
on, on how that rollout is functioning.
In particular, it seems to have
interesting tie-ins to the Access
program that we've talked a lot
about, um, in trying to provide
AI-centric, technology-centric
care to the Medicare population.
You can, you can make the parallels
there, I think, pretty easily that,
that this might play into that model.
We heard from Abe Sutton last week
at, I forget which conference, but
he hinted that we might see more
participants in Access coming up.
It would make a ton of sense that
Oura joins Withings and, um, WHOOP
in, uh, in partaking in that program.
So we'll be keeping an eye on that.
Martin: It's interesting to
see them also start to position
themselves as a platform.
HealthEquity, the HSA
administrator, reported earnings
last week, and they were-
Kevin: Mm-hmm
Martin: it's a small part of their
revenue, but a big part of their
growth story is this marketplace
feature which includes these rings.
And so you have like, you know, they're
getting, they're getting paid for
helping people use their HSA to buy
the ring, and then Oura is using the-
their platform to get people to use
Console Health, and it is just like
platforms upon platforms upon platforms.
Um, fascinating stuff.
In your old neck of the woods, it looks
like WakeMed got a pretty enticing
offer and said, "Oh, no thank you Yeah.
Kevin: U- UNC Health came in with a $5
billion offer per the local reporting, um,
that apparently saw the terms of the deal,
which is over 2X what Atrium offered them.
Nonetheless, Wake Med declined UNC's
offer, is continuing to go forth with,
uh, Atrium's offer, which, you know, if
these were public market companies and
you got a bid from a company for 2X,
you'd have a fiduciary duty to, I, I, I
think, um, explain yourself a bit more.
Nonetheless, uh, it sounds like that's
what Wake Med continues to plan on doing.
Interestingly, I, I mean, there's
a ton of tension right now in that
local market around what this deal
is going to do to healthcare costs.
Obviously, there's the general narrative
around, um, provider consolidation,
increasing cost of care despite what,
um, every health system talks about
when they go forward with these mergers.
And Wake Med's CEO, uh, pretty clearly
indicates what's going on here, right?
He, uh, talked in one of the articles,
um, he was talking about how Wake Med
is at a competitive disadvantage in the
region because it charges 10% to 30%
less than its competitors, uh, in the
region, and that is causing issues for it.
So it is, you know, trying
to find surer footing.
Logically, it makes total sense.
I, like, I can't fault them for that.
I, yes, it is a dis- disadvantage
if you are charging 30% less than
your competitor in the market.
That is an issue.
It also indicates what's going to happen
when Wake Med sells to its competitor, no?
Martin: A little bit.
I would imagine the PR
person's like, "Iâ¦
You gotta stop saying that."
Like, the, the, the, the
North Carolina regulators are
gonna make that point for us.
You don't need to hit it in, uh,
hit it as part of your pitch.
Yeah.
So we
⦠Kevin: Keep, keep us moving.
Martin: Oh, yeah.
I was gonna say.
So we are- ⦠about to welcome ourâ¦
I mean, yeah, it's, you go all day.
Uh, we are going to
welcome our first guest.
Uh, his name is Amit.
He's calling in from Denver.
Amit, welcome to the show.
Amit: Hi.
Can you guys hear me okay?
Martin: We can hear you great.
Amit: Great.
Great.
Kevin, Martin, it's a, it's a joy.
Thanks so much for having me.
Martin: Thanks for, thanks for being here.
I, I said you were calling
in from Denver, but I don't
actually know if that's the case.
Are you- You're
Amit: right.
You're right.
I'm calling in from Denver.
Martin: Beautiful, beautiful, uhâ¦
Are you at the office today in beautiful-
Amit: Uh, I'm at the home office today.
Uh, not in the, not in the g- in the
Virta office today, but, uh- Nice
but it isâ¦
You, you hit it right, Martin.
It's beautiful, it's sunny.
Uh, we had a little rainstorm
last night, and so everything's
green and sunny this morning.
Martin: We are so excited to chat today.
I feel like, you know, you at Virta,
you all at Virta have been focused on
metabolic disorders since before they
became all that anyone could talk about.
I'm wondering if you could kind of
start and, and kind of give us a little
bit of that, that backdrop of saying
like, "We were focused on metabolic
disorders before they were cool.
We're now in the GLP-1 era."
W- w- wh- what's that story been like,
and what's that experience been like?
Amit: Martin, I'm gonna give you the
tr- the, the, the triple threat here.
We were focused on metabolic disease
before it was cool, we had AI before it
was cool, and we were, um, prescribing and
de-prescribing GLP-1s before it was cool.
So, um, uh, I, we got
the triple threat here.
Um, just so your listeners know, if
you haven't heard of Virta, we're
on a mission to reverse metabolic
disease in a billion people.
We combine medical care, personalized
nutrition, and tools like GLP-1s,
uh, to help people sustainably lose
weight and reverse diseases like
cardiovascular disease and type 2
diabetes, and we deliver all of our care
via a continuous remote care platform.
It leverages AI to bring to bear great
technology and human clinicians in order
to help people sustainably make change.
We partner with, um, with, uh,
plan sponsors and help them save
money by making people healthier.
And so that was a mouthful, uh, but again,
it, it goes back to the triple threat.
We started our, our clinical trial
in 2015 in Indiana with patients that
had type 2 diabetes and pre-diabetes,
and through publishing, um, uh, you
know, 90-day, uh, one-year, two-year,
and five-year data, um, we have shown
that we can fundamentally, using a
nutritional, personalized nutritional
protocol, reverse- Their disease.
Um, and, uh, and what that means is
that we help people manage all of these
symptoms of metabolic dysfunction.
So symptoms of metabolic dysfunction are
high blood sugar, high, uh, cardiovascular
risk, um, liver disease, kidney disease,
uh, weight, you know, weight gain.
And so we are able to help people
do that using a nutritional
protocol that we deliver, um,
that we deliver via, via our app.
Um, I, of course, wanna get into a ton
more detail, but would love to, uh, love
to partner with you on how to do that.
Kevin: Amit, I'd be curious to hear how
conversations with employers and the
plan sponsors have changed over the last
several years as, uh, yeah, it seems
like culturally GLP-1s have taken off.
I assume every customer of yours
is thinking about how, like what
are we doing in terms of GLP-1s,
offering them to our employees?
How do we navigate the cost of GLP-1s?
What's the impact of all of this?
Why do we need nutritional
programming on, on the side of GLP-1s?
Like, can you walk through what
the conversation is like with
customers today, how that's
changed kind of pre-GLP-1s to now?
Amit: Absolutely.
I'll start with where we are
today, and then I'll do a
little bit of, uh, the history.
Uh, where we are today is you, you
both are absolutely right in your
first two questions, where GLP-1s
dominate a lot of the conversation.
They dominate a lot of the
conversation and the mind share,
um, for a couple of reasons.
Number one is they're a huge
driver of cost, as you both know.
Uh, and number two is that they, y-you
know, they seem like they are something
distinctive and new to help with a
problem that a lot of people have.
Uh, let's frame the problem
that a lot of people have.
About 93% of people in America
have some, adults in America have
some metabolic dysfunction, have
met- some metabolic disorder.
Ninety-three percent,
that's almost everyone.
Uh, and the, one of the most common
ways that shows up is obesity.
And so somewhere, depending on what,
you know, what source you look at,
it's 60% to 70% of people have obesity.
And so when you have a drug that they're
marketing as can help with that problem,
it ends up being on everyone's radar.
If you're a plan sponsor,
you're thinking about this.
And so that is the most common current,
uh, version of the conversation, and
what that means for us is that we,
we feel like we're in a great spot.
Again, we've got over a decade
of working with these drugs.
Just so people know, GLP-1s, and I
think most people on this call will
know this, GLP-1s were initial-
initially type 2 diabetes drugs and
have been so for over twenty years.
And so when I say we started our
clinical trial in 2015 and worked
with patients with type 2 diabetes,
many of them were on these drugs.
Uh, at the time, they were
called Ozempic and Mounjaro.
They're still called Ozempic and
Mounjaro if you're, uh, if you're
prescribing them for type 2 diabetes.
They're just also called Wegovy
and Zepbound if you're prescribing
them for some of these other
indications, uh, like obesity.
And so we actually have data to show
how patients, uh, uh, uh, how, how
we work with patients on these drugs.
And the, what I like to say is that
we're the best solution before,
during, and after GLP-1 use.
Before, it turns out that 65% of
people that wanna lose weight wanna
do so without the use of a drug.
Um, and the wonderful part about Virta
is that we have shown our nutritional
approach provides the same weight loss at
one year out to two years as these drugs.
And our n- and our weight loss, by the
way, is on an intent to treat basis, so
it's on a, it's across the population.
It's not what the, what is p-
what is published for these
drugs, which is, um, just on the
people that stayed on the drug.
Um, okay.
But that's okay.
So before, so, so on the way in, on
our, on p- on people's way in, we
counsel them to take the nutrition
pathway, and on, and are honestly about,
um, about as successful, 60% to 70%,
as the population would indicate in
getting people to choose that pathway.
In terms of during, it'sâ¦
GLP-1s are a wonderful tool, and
because we're a national provider,
we actually prescribe them
Number one is around comorbidity.
Again, for comorbidities, it would
make sense to prescribe them.
And number two, for people who are
very, um, concerned about starting
the nutritional protocol, we
find it a great way to kickstart
their weight loss journey.
In addition, when the FDA approved
GLP-1s, it said you have to pair it
with weight, with, uh, with a lifestyle
change, and Virta is the proven
lifestyle change that you can do with it.
And so we find it to be a great kickstart.
It does bring down food noise,
but by the way, so does our
nutritional protocol over time.
What you, what you hear is that people,
um, reduce their food noise and eat right.
And then after, again, the only company
with peer-reviewed published data to
show that we maintain weight loss out
to 18 months post-discontinuation of
GLP-1s, again, done safely, uh, in
partnership with our provider group.
So, so anyway, that's the key
discussion that's happening today.
Um, you know, that obviously saves money.
One of our Fortune 100 clients,
we recently were able to show
them we saved about 50%, um, GLP-1
spend over the course of a year.
Again, uh, 50% while making their
people healthier, not just by provid-
providing friction, but by actuallyâ¦
and utilization management, but by
actually making people healthier.
Um, Kevin, you asked about
the evolution over time.
I'll answer that very quickly
and then, uh, allow you to, allow
you to direct me to what's next.
Um, the evolution over time, I
would say, is, again, 10 years ago
when we first were selling toâ¦
We actually didn't really start our
commercialization, commercialization
in earnest until about kind
of six or seven years ago.
But when we first were selling to these
plan sponsors, um, w- you know, we, we
initially would tell them about all the
metabolic diseases we could solve, and the
one they were most interested in was type
2 diabetes because it drove a lot of cost.
Um, what GLP-1s have successfully done
over the last few years is provided a new
price point and cost point for a disease
that a lot more people have, like obesity.
And so while our, our earl- our
earliest customers, US Foods, for
example, was one of our early customers,
they actually covered Virta for
pre-diabetes, uh, and obesity early on.
Mm.
Um, but it wasn't something that
was a huge part of our business
until GLP-1s, um, took the stage.
And, uh, and so anyway, so that's
how the conversation has changed.
And now they are the dominant piece of the
conversation is what your GLP-1 strategy
is, specifically in the employer space,
a little bit different in health plans,
um, but, but in the employer space,
that's a big piece of the conversation.
Martin: One of the things I found
really fascinating is you've been
publishing a lot of stuff recently,
serious liver disease, pancreatic
cancer, chronic inflammation, stuff
that intuitively I don't think of as
metabolic disorders or, or diet related.
I'm curious, you know, where does the
Virta approach work outside of, outside
of just the sort of what we would
conceive of, of metabolic disorder?
Amit: Yeah.
Martin, we love that question.
The wayâ¦
I'll go back to that 93% number.
I believe that was a Swiss Re
report from last year that, that,
where, where I pulled that from.
Um, 93% of people have
metabolic dysfunction.
It turns out the root cause of
many of these issues is the same.
So let's back up.
When we think of high blood sugar,
a disease of high blood sugar, um,
we think t- di- prediabetes, type 2
diabetes, and we try to, our approach
is try to manage that symptom of
high blood sugar with medicine.
Then we think of, uh, high blood pressure,
try to manage that with medicine.
Then we think of, um, liver disease,
MASLD or MASH or NASH or however,
you know, I think the latest
is MASLD, try to manage that.
There's one drug on the market for that.
Um, you think of, um, a kidney
disease, multiple drugs on that.
It turns out that our healthcare system,
as you both know, and, and I heard part
of your previous conversation you talked
about this in different ways, is really
ma- it's about managing those symptoms
Um, and so, a-and, and, and, and a lot of
the training that we go through is, uh,
that our physicians go through is about
managing each of those individually.
And what we've discovered at
Virta is that the root cause of
all of those things is the same.
It's what you eat.
And so, um, what weâ¦
So over the last 10 years,
we've been working on that.
We've got the only scaled program where
we can deliver the results based on
helping people change what they eat.
Um, and so we just started
looking at the claims datasets
around those, around that data.
Again, we've got hundreds of
thousands of patients over a decade.
And so as we started looking at the
claims datasets, that's where we
were able to start really connecting
all of these different conditions.
And so we looked in claims
data and we said, "Hey, when
you solve what people eatâ¦"
By the way, everybody that was enrolled
in Virta over this period, not everybody,
the vast majority, over 90% of the
people were in the Virta treatment
for type 2 diabetes, pre-diabetes,
or obesity or, or overweight.
Is those are the three conditions
you enrolled in Virta for.
When we looked at the claims, um, uh,
at the claims for the intervention
group, the Virta group, compared to
folks that were similarly matched, so
started with those same, uh, with similar
conditions, and over the course of time,
we saw a re- a significant reduction
in, um, the, uh, in cardio- in, uh,
cardiovascular risk, uh, specifically
a 54% reduction in major adverse
cardiovascular events and death, MACE.
Um, significant reduction.
And so again, you solve that root cause
of the problem and people are dying
of cardiovascular disease a lot less.
Um, same thing in CKD.
We looked at the incidence of CKD
and CKD progression over, over in our
group versus the other group, and it
turns out that, like, it got better.
By the way, we have additional
data on improvements in eGFR.
So it's not just that the outcomes got
better, we could actually now speak
to some of the underlying processes
that got, that got better or the
underlying biology that got better.
Um, same in MASLD.
Uh, same, and I, you know,
I could go down the list.
Um, recently you, you, as you mentioned,
we've just pu- uh, released a paper
on inflammation markers and the
significant improvement in inflammation.
And so I, I guess the, what, you know,
when you solve the root cause of that
issue, all of those symptoms get better.
Uh, and at this point, we have
peer-reviewed published papers on
essentially all the ones I mentioned,
depressive symptoms over two
years, improvements in knee pain.
Again, you lose weight, uh,
musculoskeletal gets better.
Uh, and again, it comes from solving
the root cause of that problem.
Kevin: So one of the fascinating parts
of this conversation to me, if I think
about nutrition as the root cause of
the problem, getting people to eat, eat
healthier, eat better, um, solving these
various symptoms, that like the theory
of that case makes total sense to me.
It also seems much easier societally
to convince people to just inject
themselves with medication that,
that solves it without changing the
way they eat, so on and so forth.
And, and, and that seems like a, a
cultural moment that we're in today.
But I also notice the, the broader kind
of maha conversation, more focus on food
supply, more consumer cultural awareness
of, of what we're putting into our
bodies, and our overall kind of general
health and wellness is part of that.
And I'd be interested in yourâ¦
Ha- have you, have you seen any tailwinds
from a nutritional perspective, from
conversations about food, what people
are eating in the consumer world from
this kind of maha sentiment that, that
we've been talking about food supply
so much more in recent months, years?
Amit: Kevin, there are like a couple
questions, uh, uh, uh, layered in there.
So I'm gonna- Yes, for
sure ⦠do my best.
Uh, the, the fir- the, the, the last
question you asked was around tailwinds,
and I would say we've absolutely
seen tailwinds over the last decade.
I joined Virta in 2016, and I, um, a-
and look, this isn't an N equals one
conversation, but we'll make it w- we'll
make it so for, uh, for a minute here.
And I got on the Virta treatment
at the time just to try it out.
Uh, and now I have been
doing it for a decade.
I felt so good.
I lost about 20 pounds.
I feltâ¦
And just for me personally, when I
go to Costco and I go to the store,
finding things, I, I'm alsoâ¦
But, but not only am I low carb,
I'm also vegetarian, so finding
things has become a lot easier.
But that's just true a- across the board.
I mean, as we, uh, we have a
very active patient community.
People are, uh, are constantly
talking about what they've
seen, what they've heard.
I think, you know, a, a decade ago when we
would say things like sugar and processed
foods and, and processed carbs are, are,
are not that good for you, we had to doâ¦
That was an education point for people, I
think, and, and it took some convincing.
Uh, it doesn't take as
much convincing these days.
People are kind of like, "Yeah, I get it.
I see it.
I've heard that.
I've heard that through, um, I've heard
that not only from, uh, you know, social
media and Mahmoud, but from the doctors."
You know, like- Mm-hmm ⦠I
think more and more people are,
are accepting of that, of that
theory, um, and that approach.
And so I would say that the
broader acceptance, the-
broadly, we see tailwinds.
Um, now, uh, one of the things that you
mentioned that I think is a, I think
is a assumption that many people make
is that it's way easier to get people
to want to inject themselves, uh, or
to get people to want to take a pill
than it is to make a lifestyle change.
I actually don't think that is true.
Our- my experience is that
that has not been true.
Uh, and, and by the way, I think painting
any population with broad, with broad
brush strokes doesn't make sense.
So I'll go back to my data.
You know, is there a percentage
of people that would rather take a
pill or inject themselves or, uhâ¦
Sure, sure.
But I don't, I'm not sure
that's the vast majority of the
people that have this problem.
And I'll go back to the 65% of
people that wanna lose weight, wanna
do so without the use of drugs.
It turns out that the science that we've
been trying to treat these people with
has been wrong We've been saying eat
less and exercise more, starve yourself,
and then, and then feel good about it.
Well, it's not surprising that
that's actually not sustainable.
And so what we have proven at Virta
is that if you make the right changes,
if you change what you eat and not
starve yourself, actually just change
the macronutrient balance of what you
eat, shift your body to being way more
efficient at burning fat as its primary
fuel source, and eat to satiety while you
do it, it's actually quite sustainable.
Um, and when it becomes sustainable and
enjoyable, then I think more people,
more people are willing to do it.
And so, I mean, that's what Iâ¦
A- again, that's also my
n equals one story, right?
Like I, I, uh, I definitely, you
know, at the beginning thought it was
really hard, and then as it became m-
as I got more used to it, I loved it.
I mean, I feel so good.
I know I'm, I've been on it for 10 years.
And so that's kind of
where, um, where I thinkâ¦
W- what you just said is what,
um, is what, uh, I think o-
our, our system is trained in.
We're trained- Mm-hmm ⦠as providers
and, and, and as, as a health system
to do things fee for service, and
the things that we can most easily
do is provide pills, uh- Yeah
and injections, and it's
also what our pharmaceutical
companies are, are experts at.
You know, it's like, hey, like,
you know, here, all theâ¦
Again, I'll go back to
I- high blood sugar?
Take these four meds.
High blood pressure?
Take these two meds.
You know, liver disease?
Take these meds.
You know, and like that's
what our system is built for.
But if you think of changing behavior
as like something that can actually
drive this value, people wanna
do it, and they just need help.
They need to know how to do it.
They need the support, you know, the human
support as well as in the moment support
that we can provide, and when you do
that, I think you can drive big change.
Kevin: I'm excited to see more
Super Bowl ads from Virta talking
about- ⦠these sort of changes
versus all of the drugs that I
Amit: could take.
Is Health Tech Nerds gonna
give us a Super Bowl?
I'd love that, man.
Kevin: We'll, we'll work
on that for you, Amit.
Martin: The Health Tech Nerds Super Bowl.
Amit, this has been so great.
Uh, thank you so much for your time today.
We really appreciate it,
and we'll catch up soon.
Amit: Kevin, Martin, I'm
greatly appreciative.
Thank you so much, guys.
Martin: Nice chatting with you.
Have a nice day.
Amit: Yep.
See ya.
Bye.
Martin: And now we're
bringing on Michelle.
Michelle from Here and Now
Health, how are you today?
Michelle: I'm doing great.
How are you both doing?
Martin: Doing great.
Awesome.
So I used to work for Medicaid, and I
thought I knew a lot about Medicaid,
and then we had our first conversation,
and I learned about a whole new
side of Medicaid- ⦠that I did
not know, which is that, uh, foster
children are entitled to Medicaid,
uh, or youths that age out of, uhâ¦
And in some states it's run by special
plans, like sort of carve-out plans.
Can you give us aâ¦
Before we get into Here and Now Health,
which is fascinating- Yeah ⦠can
you give us a little bit of a sort of
history and overview of how Medicaid
and the foster system interact today, in
the past, and, and what the trends are?
Michelle: Yeah, absolutely.
So you're not alone, Martin, for starters.
A lot of people that know a
lot about Medicaid, um, this
is actually new to them.
And so, um, if you think about it, whatâ¦
We'll go back a little bit to what
happens when a child comes into the
foster system, and essentially what states
are saying in those cases is that, "We
can do a better job being this child's
parents than their biological parents."
And so while not getting too much
into the politics of that, you know,
i- i- as a thesis, um, the, the state
is, is literally taking custody of
the child, and as that child's pseudo
parents or caregivers, they then
give that child their insurance.
I mean, that's kind of the
easiest way to look at this.
And so children who come into the
foster system are automatically eligible
for that state's Medicaid program.
And a lot of people don't realize
this, but, um, it's not just
kids within the foster system.
When youth age out of foster care or
they turn 18 and essentially become
adults, um, and at that point were still
in cu- the custody of, of the state's
child welfare system, they take that
Medicaid with them, much like if your
child turns 18, they remain, you know,
eligible for your insurance while they're
in college, and oftentimes beyond.
And so those youths stay
on Medicaid until 26.
Um, the other subset is actually children
that are adopted out of the foster system.
Almost all children who are adopted
out of foster care also remain
eligible until 18 or even 21.
So as we'll probably talk a little bit
more about, you know, my background
for starting Here and Now Health,
my husband and I have six children.
Four are adopted out of foster care.
Even though my husband is a naval officer,
so all of our kids have TRICARE, our four
who are adopted also have Medicaid until
they're n- they're 21 here in the State
of Virginia, and that is because of their
own connection to the foster system.
So it is, it's a federal mandate, um, and
just kind of as a baseline for what we're
talking about today, that eligibility
is based on the child or that young
adult's connection to the foster system,
and not based on income requirements,
not based on work requirements, or
anything really from their, their
parents or the adults in their lives.
Kevin: One just more level
setting question from me on
the foster program writ large.
Um, you said federal mandate, but a
lot of it sounds state implemented.
Obviously, Medicaid has a lot of state
dynamics and also federal dynamics.
Um W- what is each, what, what's the
federal government's role in the foster
program right now, and how does it work
with states in ensuring consistency across
programs, and what's kind of current
state of that federal state partnership?
Michelle: Yeah, so it's, I mean, we could
talk for probably several hours about
some of the- ⦠nuances of this, but-
Yes ⦠really, in like in its simplest
form, um, federally it's mandated that
this population is covered, and just
like almost everything else within a-
Medicaid, states have a lot of kind
of autonomy in how they roll it out.
Yeah.
How they actually cover this population.
So in some states, this, kids or
young adults are, are put on, um,
Medicaid plans just alongside any other
Medi- eligiment, eligible Medicaid
members, so they're auto-enrolled.
You know, there might be three or
four MCOs that are a part of that, um,
you know, broader Medicaid contract.
The really interesting thing about
this population is there, there's
about 15, 16, 17, depending on how you
look at it, states that actually take
this population and they carve them
out and create a specialized plan.
And so most states call that either foster
specialty plans or sole source plans,
and they open it up as a competitive RFP.
They're actually very competitive.
Medicaid MCOs go after them pretty hard.
And they're awarded as sole
source contracts, typically
for five years or longer.
And so what that means is every child
or young adult in a state that has
Medicaid because of their connection
to the foster system is on the same
plan or is covered by that one MCO.
So here in Virginia, Anthem
HealthKeepers, um, owns that contract.
And so all youth in the foster
system, adopted out and aged out,
are now on Anthem HealthKeepers
on that specialized plan.
So that's where it gets really interesting
from a kind of state by state perspective.
Martin: Can you give us some
perspective on w- why it might make
sense to do a carve out like this?
What are the, the needs that, uh,
foster-connected youth or young adult
have that are different from the
sort of general Medicaid population?
Michelle: Yeah, so what's really
interesting about this, that al- that,
another thing that kind of surprises a
lot of people is that more conservative
states actually championed this early.
So Texas is actually, from my
understanding, the first one
that had a foster specialty plan.
It was about 16, 17 years ago, and Centene
has actually owned it the entire time.
So they also have a lot of longevity
with these, with these contracts.
And you can also kind of look
at it as, okay, we have this
population that we have to cover.
Again, we don't have a choice
because it's federally mandated.
We have some autonomy as a state
in how we're going to cover them.
And so what it s- seems kind of like
to me has happened is in some states
that tend to have fluctuating coverage,
especially for their pediatric population.
They sort of take this population
separately, say, "Okay, if we, if we
put them on a separate plan, we can
follow those, again, federal mandates.
We can make sure they're covered even
if the, the coverage for the rest
of our pediatric, pediatric Medicaid
population may not be super consistent."
And so that's where we've seen,
again, it's, it's sometimes states
that actually don't have the best
Medicaid coverage for their pediatrics
that have these specialized plans.
But it's become more diverse.
You've got states like Illinois,
Washington, North Carolina was a
newcomer in 2025, so it's geographically,
politically pretty diverse in
terms of who has sole source plans.
Um, from the need aspect, you've got
a population that tends to have very
high levels of, um, you know, both
physical and mental health needs.
You've got teens in foster care
that have up to 80% of mental health
diagnoses as a population as a whole.
You also have very low levels of
access, so there's a lot of transiency.
So if you think about it, one of
the, one of the aspects of a child
or really anyone's life that make
it difficult to have continued
healthcare access is transiency.
So a child or an adult, if they move
pretty frequently, it makes it very
hard, everything from wait lists to
having consistent providers to having
providers that know medical history.
And so that's a very common thing, of
course, for children within the foster
system is to, to have a lot of moves,
unfortunately, or a lot of transiency.
Um, so when you couple those, those,
you know, higher acuity needs, higher
diagnosis rates, less stability, um, you
c- you really kind of come up with a, a
oftentimes perfect storm for not getting
great care, and that's a lot of what
these, these plans are, these sole source
plans are really built around fixing.
Kevin: Michelle, I, I, I wanted to turn
a little bit more to Here Now and the
model that y'all are building there.
Um, Iâ¦
It's funny, you know, having written
about the healthcare innovation space
writ large for every weekend for 10
years now, foster care is not something
that I think has ever come up before.
Mm-hmm.
Not that, you know, I, I, um, it's not
an important program, but you don't see
much startup activity targeting the space.
I, I would, I would love to hear
how you thought about approaching
the foster care market, how youâ¦
As my understanding is virtual care
model for mental health for foster kids.
Um, how did you land on that
as the initial build-out?
How are you thinking about the model?
What is Here Now up to, uh, today?
How does the business
look like at this moment?
Michelle: Yeah.
So it was really intentional,
the build-out, I will say.
Um, I've been in
healthcare my whole career.
I spent about six years helping to build
a company called Hazel Health, the largest
provider of school-based telemedicine.
So, you know, a lot of my background was
in pediatric virtual behavioral health.
But the background on
Here Now really goes back.
In 2013, my husband and I became
foster parents in the state of
Georgia, and over about five years,
we fostered over 40 children.
Um, four of our six, as I mentioned,
are adopted out of foster care.
And when we closed our home to
fostering, I became a CASA volunteer,
or Court Appointed Special Advocate,
advocating for system-impacted families
in the juvenile justice system.
So I had, you know, different
interactions, different roles
kind of within the child welfare
system across several years.
And what I found was even though I was
working in the healthcare system every
day- I was literally working at an FQHC
while we were foster parents, so at
the ground level of safety net care.
And I had, you know, access
arguably, you know, more than most
people to the healthcare system.
I was failing to get kids in our
own home the mental healthcare they
needed, and it wasn't a coverage issue.
You know, 100% of kids, of course,
that came to us were, were covered
by Medicaid, but it was, it
was literally everything else.
We would almost never get
a Medicaid card with them.
And so I'd go to sign them up and
community providers would say,
"Oh, uh, until you have a physical
Medic- Medicaid card, we can't
put them on a, on an intake list."
Or I'd have different birth dates
on different forms that were given
to me, so we literally would not
know which one was the correct
birth date or which one was given to
Medicaid to be able to match that up.
Um, and then just wait lists.
We, we had one therapist in our
county in, in North Georgia who
accepted Medicaid, and he oftentimes
had a six-month wait list.
Not to mention, he was an older white
male, so a lot of our teens and middle
schoolers, especially our females
that came to us, weren't comfortable
opening up, especially ones that
had been victims of, of, of males.
And so there were just all of
these different things that would
keep us from getting kids in care,
and then we saw the escalation.
Um, we were constantly told to go to
the emergency room because, again,
we have a really high level of
accountability for this population.
So the child welfare system, our
caseworkers would say, "If all else
fails, just, just go to the ER.
They can't turn you away."
But then you see kids who show up
to the emergency room for behavioral
health issues, they get hospitalized.
They end up in residential care, and
oftentimes because it's the only bed for
them to sleep in, because we have to have
a bed for kids in foster care to sleep.
And so it wasâ¦
You know, again, I was, I was seeing
this kind of unravel in front of my eyes.
Um, later on, I, I found the stat
that we spend about 10X the medical
spend on behavioral health for kids
who have a foster care connection
in comparison to the rest of
Medicaid, and it makes sense, right?
We-- I saw we were paying
for it in crisis care.
We were constantly at the emergency room.
Kids were being hospitalized
and not released simply
because they had nowhere to go.
So I started to just ideate, like, what
would it look like if we did this better?
Um, this is a population where if
you talk to almost anyone in a state-
Politicians, stakeholders, Medicaid, and
you ask them, "Who are you most concerned
about when it comes to our youth?"
They will almost inevitably say
kids that are in the foster s-
system or kids that are connected.
And so I knew that the, the, the
desire was there to do better,
but like you said, Kevin, n- no
one is innovating in this space.
Mm-hmm.
And so I just started to look
at it as like what would, what
would make this make sense?
And so intentionally virtual, really
specialized care that we can get to
kids early and often, so within 48 hours
of when they enter the foster system,
that can stay with them even if they
move, so kids don't have to retell
their story, was what I knew was needed.
And I knew that we had done this
in other areas Within virtual care.
Mm-hmm.
It had just never been built truly
for, um, for the foster system.
And so that is what Here Now Health is.
We provide intentionally virtual
specialized care early and often
for any child or young adult that
has a, has their Medicaid because
of their foster care connection.
We partner with specialized Medicaid
health plans that hold these sole
source contracts to not only help
improve their outcomes, but reduce
their costs by preventing the crisis
care that we know happens too often.
And we include caregivers.
So if that is a foster mom, if that
is a grandma that has custody, if that
is a bio dad that's working a case
plan to get their child back home,
we include that adult, adult because
we know that that is the only way to
really stabilize the child's world.
Martin: I know we have you
a couple minutes after time.
If you have a couple more
minutes, I would- Yeah, I
Michelle: do.
Yeah
⦠Martin: great.
Great.
Great, great.
I would be curious to hear a little bit
about, you know, so it, it seems like
there's a, a sort of nice benefit from,
um, having a sole source contract in
that you have a single payer that you're
working with, so you can get them the
help right away and intervene right away.
I'm curious how you go about, um, like
the, the sort of contracting with them.
Like historically Medicaid, it's been
hard to get providers, not just because
of regions, but also just because
the reimbursement rates are low.
Right.
I'm curious how you kind of address
that and get the, these foster impacted
youth and their caregivers the sort of
level of care that they, they deserve.
Michelle: Yeah.
So we, when it comes to getting
them the level of care, we, we often
say we don't take no for an answer.
We are built around the realities
of foster impacted youth, and
you can't do that by accident.
You, you have to really intentionally
build it from the ground up.
Um, and that goes from everything
from our technology and our product.
We have a no login experience.
Um, and, and that was intentional because
as a foster mom, I was locked out of
almost every single child's EMR, you know,
account that came into our home because
that EMR was set up by three foster homes
ago, and nobody could get the login.
And so we've in- we intentionally built
a login-free experience, and that's
really hard from a product standpoint.
It's, it's not easy to do.
But again, we did it really
intentionally from, from the beginning.
Our care model we built alongside
the, um, Florida Institute for
Child Welfare based on very specific
research that showed what clinical
models work within this population.
Um- And so we, um, so yeah, so
we, you know, I just believe very
strongly that you can't accidentally
do well by this population.
We have a less than 10% no-show rate,
and in, in Medicaid across the board,
it's typically around 30% to 40%.
But we call our aged-out youth the
day before their appointments and
tell them we're excited to see them.
Um, we, you know, help our, our teens
and aged-out youth oftentimes get a
no-cost cell phone from their Medicaid
health plans because they aren't able
to l- to, you know, join their sessions
when their cell phone gets cut off.
We have gotten our therapists licensed
in new states when a child is getting
moved to a, you know, a kinship or
a family placement in a new state
so they can continue with that care.
We, we do whatever needs to be done.
And so we go to health plans,
and we let them know this, that
there's no one-size-fits-all fix
when it comes to this population.
We are going to uniquely care for
every family that we work with.
Um, and in doing so, we're again
gonna help them improve their
outcomes and, and therefore re-win
these sole source contracts and s-
and save on behavioral health costs.
But they have to work with us, um, in kind
of the, the same kind of unique way that
we are s- we are supporting their families
Martin: I would imagine it is a lot less
expensive for them to pay your therapists
good rates than it is to have foster
children staying in inpatient psychiatric-
Michelle: Ex- exactly.
They pay about the same for one, um, full
month of Here Now health care as they
do for one day in a residential setting.
So it's that, you know, it's that
1 to 30 ratio that is, is helpful.
Um, we are truly the lowest
cost care, and that'sâ¦
I mean, that's our thesis.
We believe that most kids
actually need lower cost care.
They don't need IOP.
They don't need hospitalization.
They need a really healthy
therapeutic relationship from day one.
'Cause again, we're dealing with
a population that has 80%-plus
mental health diagnoses, and
they deserve the very best care.
Kevin: Yeah.
Michelle, last question from me.
Um, A, kudos to you for focusing on this.
Like, this is really cool.
Like, I love this conversation.
Um, uh, but I'm, I'm curious.
W- what's biggest bottleneck that
stops this from being available f- to
every foster kid in the country today?
Like, what, what do we need to solve
so that programs like this can, can
roll out to more of the population?
'Cause it seems like such a
unambiguously good thing to me
that we should have more of.
Michelle: Yeah.
So I would say, like, for us personally,
it is that state by state we have to
have buy-in from that health plan.
And as you all know, that even if you
can say- Yeah ⦠"Look, we've- Exactly
⦠we're almost guaranteeing you lower
costs in the long run," it, it, it's
still not usually a simple conversation.
Um, contracting and credentialing, you
know, is, is not easy with Medicaid.
And so we are going by a state, state
by state strategy of where can we have
truly the largest impact, where can
we have a really deep partnership?
'Cause we're al- we're building to be the
healthcare partner of these Medicaid MCOs.
We're not just building to
be a, a telehealth vendor.
Um, and so we're very strategically
launching state by state, and we're
not trying to just do a land grab
of how can we get into 50 states
in the next two to three years.
But from more systematic, um,
I would say that y- you know,
again, states have autonomy for
how they cover this population.
And so more and more states are
moving toward sole source plans.
Again, we had the very first
one about 16, 17 years ago, and
now we have- 17 plus with a few
RFPs coming up in the next year.
So states are realizing this is a, it's
a good way to cover this population
with the care they need and deserve,
and it's also a, a good way to hold a
health plan accountable for we're going
to give you this whole population.
But I would say that's also the risk.
Like, that, that's the
benefit and the risk, right?
If you're gonna have a sole source
contract, you have to hold that
sole source owner m- to a h-
very high level of accountability
because they don't have competition.
And so I would just say that's the, you
know, that's the risk to flag, um, when
it comes to states, is if you're going
to do this, you have to do it well, and
you have to, to really hold that, you
know, Medicaid MCO accountable for, for
providing the, the care that they're,
they're Obligated to provide, I guess
Kevin: I lied, can I ask
one quick follow-up on that?
Michelle: Absolutely.
Kevin: Keep it going.
I can keep going all day.
Hey, I've got all day, Kevin.
I promise, just the very last one.
Yeah.
I, um, who at the state Medicaid
agencies is responsible for this?
Like, is there a team that is
overseeing foster care and that
relationship with that MCO?
Is this, like, one person who
has broader responsibilities
that side a desk for them?
Like, what is the, the current
state of the state Medicaid agency
and resourcing for this program-
Michelle: Yeah.
So it's- ⦠from a people perspective?
It's interesting in that it's a f-
it's typically a few people, and
sometimes just like, you know, like
it's a little different in each state.
I'll use North Carolina for an example.
Um, the former secretary, Kody Kinsley-
Martin: Mm-hmm
⦠Michelle: was really the
champion for the, the RFP that
came out a couple of years ago.
And he really intentionally bu- I
know he was one of the ones that
really intentionally built in.
So it's usually a mix of the, the
Secretary of Health and Human Services,
the Medicaid director, um, you know,
the Commissioner for Behavioral Health.
Kind of a mix of who's really involved
in creating the Medicaid RFPs that
go out, and how they design them.
And so just using that as an example,
I know he was a really big champion for
how that, the State of North Carolina
designed their most recent RFP, which
is where they implemented the, the
state's first f- um, specialty plan.
And the one other thing I'll say
about that, which is what Iâ¦
I'll, I'll create a question for myself
of what, what, what should happen more
often in states, or what would I love
to see more often in states, is that
they're using it more for prevention.
So the f- the foster specialty plan in
North Carolina doesn't just cover kids
in foster care, aged out youth, and those
adopted, it after, actually covers kids
on safety and family preservation plans.
So what that means is, if a family is
being investigated for suspected abuse
or neglect, and it, there's something
that's found to be a risk, but not enough
to pull that child into foster care.
So they usually create a
safety or preservation plan.
And what that means is, we're
gonna keep an eye on this family,
but we're gonna try to give them
the resources to stay together.
One of those resources they give them
now in the State of North Carolina is
Medicaid coverage for the children.
And think about that.
It makes so much sense.
If, if not having healthcare is a
reason we're gonna pull a child into
foster care, and this happened to us,
we had a teen that came to us because
her grandma couldn't get her the
mount, mental healthcare they needed.
Why would we not just give
them that healthcare at home?
Keep that family together.
It's cheaper, it's better for the
child, it's better for the family.
So now that's written into
the foster specialty plan
eligibility in North Carolina.
So a child in the home that's at
risk of foster care is put on the
foster specialty plan so they can
then access a broader array of
the healthcare services they need.
It also does something really cool,
which is it's, it's gonna be providing
coverage actually for the parents.
So anything that would keep, again,
that family from being separated is able
to be billed to the child's Medicaid.
Um, so again, like, the more we can funnel
this Medicaid coverage to prevention, the
better for families, and in the long run,
the cheaper, cheaper for states as well.
So I, I kinda like created
my last two questions.
I hope it's okay.
Martin: Abso- absolutely.
I think we're already looking
forward to having you back,
watching the story closely.
But in the meantime, where can people
find you if they wanna learn more or
are a state Medicaid director and wanna
bring Here Now Health to their state?
Michelle: Yeah, absolutely.
I'm pretty active on
LinkedIn, um, Here Now Health.
My email is michelle@herenow.health.
That's also our web address.
And you can go on there, you can
actually see our, our referral
form and how simple we've made it.
Again, as, you know, just
that intentionality behind
making it as accessible and
low to no barrier as possible.
But I would, I'd love to chat,
whether it's about, you know, bringing
Here Now Health to your state, or
even just Medicaid policy, child
welfare, you name it, I'm game.
Martin: Awesome.
Thanks so much for your
time today, Michelle.
Michelle: Absolutely.
Appreciate you, Michelle.
Thanks a lot.
Yeah.
Yeah.
Thanks Kevin and Martin.
Martin: See you.
Bye.
Michelle: Appreciate it.
Martin: What a cool place to end.
Uh- I'm
Kevin: excited.
Martin: Yeah.
That was awesome.
No, it'sâ¦
I'm, I'm really excited.
I'm really excited.
And Iâ¦
It's like a sort of, in what was not
maybe the most uplifting episode, what a,
what a cool and inspiring place to end.
Um, Kevin, if folks wanna have
conversations like this and
others, where should theyâ¦
What's the best place for
them to, to get in on it?
Kevin: HealthTechNerds.com.
Come join our community.
30,000 people talking shop about
what's going on in the space, learning
from brilliant people like Michelle
who are working up on really cool
problems and trying to solve them.
So come join us there.
Martin: Awesome.
Well, thanks everyone.